Kalamazoo-based FlowTech sells to new owners to pursue next stage of growth

KALAMAZOO — After two years of looking for manufacturing companies to buy, Dave Kersjes and Steve Remstad found an opportunity in FlowTech Inc., a small producer of fluid and air filtration products.

After being under the same leadership for 40 years, the Kalamazoo-based manufacturer had its growth stagnate. Additionally, company owner Phil Ragains, who was in his 80s, was ready to retire. Despite the lack of growth, Kersjes and Remstad saw a profitable company with plenty of runway to expand the business.

“When FlowTech came up for sale, we looked at the type of business it was, the customer base, the history of the company, and it really fit with what we were looking for from a manufacturing complexity standpoint,” Kersjes told MiBiz. “All of those things fit in our background, along with the history of the company and its reputation. Having that base to grow from, we thought we could take it to the next level with our experience.”

However, successfully completing the deal presented some challenges for the buyers, particularly when it came to how long the process took. Procuring documents and the other materials required to move the sale along took longer than normal, a fact that had deterred other buyers.

“He was in the stage of life where he had other priorities,” Kersjes said. “It was a challenge. The speed of the acquisition was relatively slow. We had to keep our eye on our ultimate goal, and our goal was to get FlowTech.”

To help get the deal to close, Kersjes embedded with the company a month prior to finalizing the transaction. While the process allowed him to move the deal along, it also gave him a chance to become familiar with FlowTech’s major customers, which include global pharmaceutical giant Pfizer Inc., Stryker Corp. and Dow Chemical Co.

Grand Rapids-based Calder Capital LLC represented FlowTech in the transaction to Kersjes and Remstad, and helped to broker the transaction.

According to Calder Capital Managing Partner Max Friar, the deal represented a perfect case of the goals aligning for the buyers and the seller.

“The buyers saw an owner that was past retirement age and saw the opportunity to do all the things that he would have done if he was 30 years younger,” Friar said. “And he saw the same opportunity with them. He saw them as being West Michigan based and having engineering and marketing backgrounds between themselves.”

The deal fits with a pattern Friar’s seen recently in which long-time friends either start a new business or purchase an existing operation as a second career.

“I’m continuing to see a lot of (situations with) two guys who are in their late 30s to mid 50s who were college roommates or long-time friends and they’ve been doing the same thing for 10 or 20 years and they’re saying, ‘Let’s go do something together,’” Friar said. “‘Let’s start a business, let’s buy a business and run it together.’ That’s a theme that we continue to see.”

At FlowTech, Kersjes plans to focus on growing the company’s presence within its existing customer base.

“The customers (FlowTech) has are relatively large, but they have other locations throughout the nation and we’re not in any of those,” Kersjes said. “The thought was that we could leverage some of those relationships locally and expand into other locations in other states.”

The company also expects to grow in sectors where it has a small presence, such as in the brewing, wine and spirits industries.

“If we look at that as a market as opposed to a customer base, then we can get some additional business and grow the business in those categories,” he said.

The new owners’ strategy seeks to double FlowTech’s $2.5 million in annual revenues over five years, Kersjes said. The company currently employs four workers at its 8,500-square-foot facility in Kalamazoo.

“I think we have a good base with the current product line to expand into customers’ other locations,” he said. “I think that’s the first priority.”